CapsoVision Aktie

Hello, and thank you so much for standing by. Ladies and gentlemen, welcome to CapsoVision Q1 2026 Earnings Conference Call. Please note that this call is being recorded. [Operator Instructions]. Thank you.

Thank you, operator. Good afternoon, everyone, and thank you for joining us for CapsoVision's First Quarter 2026 Earnings Call. Joining me today are Johnny Wang, President and Chief Executive Officer; and Senior Vice President of Finance, David Garcia; as well as Doug Atkinson, Senior Vice President of Sales.

Before we begin, please remember that today's remarks included forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent Form 10-Q filed by us with the SEC.

These forward-looking statements speak only as of the date of this call, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Our call today will cover the following agenda. Johnny will begin with an update on CapsoVision's business, target markets and recent highlights from our pipeline development. Then Dave will walk through our commercial update and recent financial results. After our prepared remarks, we'll open the call for Johnny, David and Doug to take your questions.

With that, I'll turn the call over to Johnny Wang. Johnny?

Thank you, Leigh, and good afternoon, everyone. CapsoVision remains focused on advancing earlier, more accurate and more accessible detection of gastrointestinal disease for patients worldwide. We are working towards a unified injectable capsule platform capable of screening for multiple cancers, including esophageal, gastric, pancreatic, liver and colorectal through a single noninvasive procedure enabled by advanced imaging and AI.

With that as our foundation, we continued to see consistent solid underlying performance in the first quarter. While revenue and new account additions remained stable year-over-year, we saw further expansion of CapsoCams used to detect a widening range of the mobile diseases.

In the first quarter, underlying procedure volume reflecting end user consumption continued to expand, demonstrating deeper engagement with existing accounts and increasing reliance on CapsoCam Plus in routine clinical practice. We believe these trends reinforce the strength of our installed base and highlights the growing role our platform is playing in supporting physician workflow and patient care.

During the quarter, we also secured key renewals for large GI networks, including Indiana University Health Systems, Providence Health Systems and the Gastro Health, which we believe reinforces the value of our platform and the strength of our long-term customer relationships.

Turning to our technology platform. We are entering an important phase in our AI strategy. As you know, we previously submitted our 510(k) application for our AI-assisted reading capability for CapsoCam Plus. We continue to expect the clearance around midyear, and we are preparing for a commercial launch shortly thereafter. We have been actively demonstrating this capability, which we have branded AI highlights at recent industry meetings and the feedback from gastroenterologists has been very encouraging.

Physicians are particularly focused on the potential to streamline review time, while maintaining clinical rigor, which we believe will be an important driver of adoption. AI Highlights is designed to identify friends with suspected pathology and present them within a structured review workflow fully integrated within our cloud native CapsoCloud platform. We believe this capability has the potential to reduce the physician waiting time, while enhancing workflow efficiency and represents a meaningful step forward in advancing a fully integrated AI-enabled diagnostic system.

Building on that momentum, we continue to make steady progress across our pipeline. For CapsoCam Colon, our development program remains on track with imaging of our second-generation capsule and its AI module expected in the third quarter of 2026. We continue to believe that our decision to prioritize Gen 2 positions us to enter the market with a more competitive and clinically differentiated product.

Turning to our CapsoCam UGI program and pancreatic cancer initiative. We are pleased to report that enrollment began this week in our clinical study. This represents an important milestone as we work to establish diagnostic criteria and build the clinical foundation for what we believe could be a first of its kind noninvasive screening approach for pancreatic disease. While this remains a longer-term opportunity, we continue to believe the potential impact in this area is significant given the lack of effective early detection tools today.

Overall, we believe the business is progressing as expected. We are seeing continued strength in utilization, advancing key pipeline programs and moving closer to what we expect will be an important inflection point with the introduction of AI-enabled capabilities.

More broadly, we remain focused on redefining how gastrointestinal diseases are detected, leveraging our platform to make diagnosis earlier, more accessible and more efficient for both patients and providers.

With that, I will turn the call over to Dave to walk through our commercial and the financial results.

Thank you, Johnny. Turning to our commercial performance. As of March 31, 2026, more than 167,000 patients have been imaged with CapsoCam Plus for small bowel screening across the U.S. and international markets. During the first quarter, we shipped 6,229 CapsoCam Plus capsules compared to 6,447 in the prior year period, representing a year-over-year decrease of 3%, reflecting the timing of shipments that have now been placed in the second quarter. Our technology continues to be supported by a strong intellectual property portfolio, currently with 85 issued U.S. patents, reinforcing our position in capsule endoscopy innovation.

In addition, reimbursement under CPT code 91110 continues to support adoption across a broad range of care settings, including both private practices and hospital systems. From a commercial strategy perspective, one of our key advantages is the ability to leverage our existing sales infrastructure as we expand into new indications. We expect that the same physician call point driving adoption of CapsoCam Plus today will serve as a natural entry point for CapsoCam Colon following regulatory clearance, creating a meaningful cross-selling opportunity without requiring significant incremental headcount.

We continue to see encouraging engagement across larger gastroenterology networks, including GI clinics and multisite group practices, where we are expanding our presence within existing accounts and continuing to deepen utilization across larger networks.

In addition, we are seeing ongoing traction within hospital systems and group purchasing organizations, particularly as contracts come up for renewal and providers evaluate alternative solutions. As Johnny noted, we are also pleased to secure renewals with several large GI networks during the quarter, including Indiana University Health Systems, Providence Health Systems and Gastro Health, supporting continued engagement across our installed base.

As of quarter end, our U.S. direct sales organization remained consistent at 26 representatives, supported by 7 regional sales managers and trainers. Internationally, we continue to build momentum, including a dedicated team of 4 representatives in Germany, while expanding our global footprint through distributor partnerships in high potential markets.

Turning to our financial performance. For the first quarter of 2026, total revenue was $2.8 million, consistent with prior year period. While the number of capsules sold was modestly lower year-over-year, this was offset by a slight increase in ASP.

And as Johnny noted earlier, we continue to see strong underlying patient volume and utilization expansion trends across our installed base. Gross profit for the quarter was $1.3 million with a gross margin of 48% compared to 54% in the first quarter of 2025. The change in gross margin was primarily due to tariffs impacting our cost of goods sold.

Operating expenses were $8.4 million, an increase of $1.5 million compared to the prior year period. This increase was driven primarily by continued investment in our pipeline, including development work related to the next-generation imaging sensor under our agreement with Canon as well as clinical trial activities supporting the CapsoCam Colon Gen 2 program. We ended the quarter with $17.9 million in cash and cash equivalents.

As a reminder, in March, we strengthened our balance sheet with the closing of a $14 million private placement with participation from both new and existing investors. We believe this financing reflects continued confidence in our strategy and provides additional flexibility to support our key priorities, including product innovation, clinical development and commercial expansion.

Overall, we remain focused on disciplined investment to support long-term growth. Before I turn the call back to Johnny, I'd like to provide some perspective on how we're thinking about the remainder of the year. We expect second quarter revenue to be higher than the first quarter, and we also expect revenue in the second half of the year to be higher than in the first half as we continue to build on the momentum we're seeing in our pipeline and customer engagement as well as the anticipated launch of the AI module for CapsoCam Plus.

Now I'd like to turn the call back to Johnny for some closing remarks.

Thanks, Steve. To close, we believe the business is progressing as expected. We are seeing continued strength in utilization across our installed base, reinforcing the growing role CapsoCam Plus is playing in routine clinical practice.

At the same time, we are approaching an important inflection point with the anticipated introduction of our AI-assisted capabilities, which we believe will further enhance workflow efficiency and strengthen the value of our platform for physicians. Across the pipeline, we continue to execute with discipline with CapsoCam Colon on track and early progress underway in our pancreatic cancer program following the initiation of our clinical study.

More broadly, we remain focused on advancing a differentiated AI-enabled platform designed to improve how gastrointestinal diseases are detected through panoronic imaging, cloud-native workflow capabilities and AI-assisted diagnostics that make review more accessible and efficient for physicians.

Our platform enables physicians to securely review cases anytime and anywhere without the need for on-site servers for dedicated IT infrastructure, while also creating a growing cloud-based data depository that we believe will serve as an important foundation for continued AI development and training over time.

At this time, Dave, Doug and I would be happy to take your questions. Operator, can you please open the line?

[Operator Instructions] Your first question comes from the line of Kyle Bauser with Titan Partners.

Maybe I will just start out regarding the application for the AI-assisted reading feature. Johnny, I guess, any sort of remaining items that need to be addressed with the FDA? Or are responses in and you're now just waiting for a response? I guess any color on the update there?

Yes. FDA and CapsoVision had a few interactions during these months. And right now, we have reacted on their request during this previous interactions. And we are waiting for a meeting in the next few weeks, and that is current status, and we have no show stoppers to my knowledge.

Great. I appreciate that. And then can you remind me -- so for the pancreatic cancer clinical study, which you just started enrolling, which is great. Can you remind me the size of this trial, how many patients and kind of the expected time line for enrollment?

For this study, we plan to enroll 120 patients with high-grade dysplasia or cancer, pancreatic cancer confirmed HGD or cancer. But we -- to account for possible dropout, patient dropout, we plan to enroll 140 to make sure we have 120 to make the statistical to make statistics more powerful.

And also, we will have 120 subjects as a reference, healthy patients reference. This 120 patients imaging will be extracted -- pulled out from our cloud storage. As we just mentioned, we have enormous turn-out repository in our cloud storage due to our workflow. So we can pull out this reference -- healthy reference images. So total is 240, yes.

And the enrollment, we cannot speculate at this time. But I would see this as a much shorter not even Colon. Yes, so that's what I can say at this point without saying too much as a public company.

Yes, makes sense, and that's helpful. I appreciate all that color. And then maybe lastly, David, I guess, I appreciate your thoughts on the cadence of revenue in Q2 and the back half of this year. Any sort of thoughts you can call out on OpEx? Just kind of wondering how this line item should kind of trend throughout the year.

Yes. So thanks, Kyle. I think that the next couple of quarters, you're going to see continued investment in the colon study as we continue to progress on that, that will continue through Q3. And then only until we get to Q4 will be the time when that will start to trail off a bit when -- as we will have completed the colon study at that point in time. But all the remaining items should be fairly stable nominal growth to support the business.

Your next question comes from the line of Bruce Jackson of StoneX.

I'd like to kind of take a closer look at the first quarter revenue number. You mentioned that the ASPs were higher. I was wondering if you potentially put in a price increase and if there was any forward buying behavior. You also said that some of the sales may have moved into the second quarter. I'm curious about that.

And of course, you often get deductible resets and everything like that out in the market. So if you could kind of put those pieces together for us and tell us how that impacted the first quarter revenue number, that would be very helpful.

Sure. I'll take that one. Thank you. Yes. So in terms of the capsule volume, it was really just the impact of timing. We saw some of the orders -- some of our bigger orders actually fall into April as opposed to March. And then in terms of the ASP, there was no price increase.

The only thing that happened there was we just saw a little bit of a shift in our mix to some of the higher-priced regions in the world. So that's really the only thing impacting ASP there and the volume. Other than that, the underlying business remains strong, and there's nothing that would have changed that.

Okay. Great. And then just a quick question on the research and development spending. Would you -- how do you expect that level for the full year to look in comparison to 2025?

Yes. So it will be pretty similar to 2025. We did spend quite heavily in 2025 on the Colon study, and that continues through -- it continued through Q1, and it will continue through Q3, as I just mentioned. So when it's all said and done, the full year R&D spending will be pretty similar to 2025.

Yes. Bruce, this is Johnny. Please allow me to add. During our workflow, our capsule is shipped to the downloading center to treat the data to -- for the cloud assess -- cloud review by the doctor. So we can measure the end user consumption very easily.

So that's the benefit -- one of another benefit of cloud. We know what features cloud doctors are using. We can monitor that through cloud. And during monitoring of this end user consumption, we can tell you the end user consumption growing -- growth is healthy. It's growing and very healthy. So that's my eking. Thank you.

[Operator Instructions] There are no further questions from the analysts. That concludes our question-and-answer session. And that concludes our today's call as well. Thank you all for joining. You may now disconnect.

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the CapsoVision Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Leigh Salvo, Investor Relations. You may begin.

Thank you, operator. Good afternoon, everyone, and thank you for joining us for CapsoVision's Fourth Quarter and Full year 2025 Earnings Call. Joining me today are Johnny Wang, President and Chief Executive Officer; and David Garcia, Senior Vice President of Finance; as well as Doug Atkinson, Senior Vice President of Sales, who will be joining us for the Q&A session.

Before we begin, please remember that today's remarks include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the Form 10-K filed today with the SEC. These forward-looking statements speak only as of the date of this call, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Our call today will cover the following agenda. Johnny will begin with an update on CapsoVision's business, target markets and recent highlights from our pipeline development. Then Dave will walk through a commercial update and recent financial results. After our prepared remarks, we'll open the call up for Johnny, Dave and Doug to take your questions. With that, I'd like to turn the call over to Johnny.

Thank you, Leigh, and good afternoon, everyone. CapsoVision's mission remains clear to make early accurate and accessible GI disease detection available to patients everywhere. Our long-term vision is to deliver an ingestible capsule capable of screening for multiple cancers, including esophageal, gastric, pancreatic, liver and colorectal in a single noninvasive procedure powered by advanced imaging and AI. With that as our foundation we closed 2025 with increased commercial momentum for CapsoCam Plus, mobile capsule endoscopy solutions. For the full year, we delivered approximately 15% year-over-year revenue growth and 21% in new account generation, reflecting continued adoption of CapsoCam Plus across both new and existing customers.

As of December 31, 2025, more than 161,000 patients have been imaged with CapsoCam Plus. We believe this growing installed base, combined with strong physician engagement reinforces the value of our differentiated platform. A wire-free capsule with unparalleled features, including 360-degree panoramic imaging on both storage and a fully cloud-based workflow that eliminates the need for external hardware worn on patient's body or on-site computing infrastructure. Importantly, cloud-based architecture is not just a workflow advantage. It also serves as the foundation of our AI strategy. Our spending image repository of the cloud storage continues to strengthen our ability to develop and deploy AI models that improve diagnostic accuracy, reducing reading time and enhanced clinical efficiency on the pipeline development front, we have continued to make exciting advances that I'd like to share.

Starting with CapsoCam Plus, we are advancing our AI-enabled road map at the end of last year, we submitted our 510(k) application for our AI-assisted reading module which is designed to enhance lesion detection and streamline physician review. We believe this represents an important step in further differentiating our core platform and expanding its clinical and economic value. Building on that momentum, we continue to advance our CapsoCam Colon program Following constructive engagement with the FDA, we have refined our development strategy to prioritize our second-generation capsule.

The Gen 1 submission and the subsequent FDA interactions provided valuable insights into both the regulatory pathway and the evolving product expectations. Based on that feedback we see a clear opportunity to advance directly to a more capable system that incorporates improved imaging performance, expanded field of view and enhanced AI functionality. As a result, we are focusing our resources on accelerating the development of CapsoCam Colon Gen 2 which we believe will deliver a more competitive and clinically differentiated solution at the launch. We view this as the disciplined and value-driven approach enabling us to bring a stronger product to market from the outset rather than iterating post clearance. We have already enrolled over 400 patients in our pivotal study and outstanding enrollment across the U.S. sites. We now expect to submit our 510(k) application for CapsoCam Colon Gen 2 and its AI module in the third quarter of 2026.

Turning next to our CapsoCam UGI program and the pancreatic cancer initiative. We continue to see significant long-term potential for a noninvasive screening approach in one of the most challenging areas in Nevada. We believe we are pioneering a novel visual assessment method for the detection of pancreatic cancer building on our platform's ability to evaluate abnormalities of the duodenal wall and to clearly identify key anatomical landmarks such as the papilla or Vater. This approach is grounded in both our prior clinical work and established scientific literature and represents a potential paradigm shift in how pancreatic disease could be detected at an earlier more treatable stage.

Following our initial Breakthrough Device Designation submission, we engaged with the FDA and received constructive feedback which confirms the system's ability to visualize the papilla and associated abnormalities. The feedback also outlined the need to further define diagnostic criteria which we view as the natural next step in developing the first of its kind screening modality. To address this, we are initiating a clinical study expected to begin in the second quarter of 2026. This study will enroll approximately 60-90 patients and is decided to establish diagnostic criteria for malignancy using the CapsoCam UGI system. We are conducting this work in collaboration with clinical experts, key opinion leaders, including leadership of the top professional societies in the pancreato biliary field.

We believe this study will be an important step in generating the data needed to support both regulatory advancement and future Breakthrough Designation risk submission, while continuing to build the clinical foundation for a noninvasive approach to early pancreatic cancer detection. Importantly, our regulatory pathway for CapsoCam UGI is independent of the Breakthrough program, and we remain on track in advancing these initiatives.

Finally, and supporting all these efforts, we recently strengthened our balance sheet with the completion of a $14 million private placement with participation from both new and existing investors. We believe this reflects continued confidence in our strategy and provides additional flexibility to invest in product innovation, clinical development and commercial expansion. Overall, we believe we are well positioned heading into 2026 with a growing commercial base differentiated AI-enabled platform and a disciplined approach to advancing our pipeline. We remain focused on executing our strategy and delivering long-term value for patients, physicians and shareholders.

I will now turn the call to Dave to cover current commercial and operational highlights as well as our financial results for the fourth quarter, Dave?

Thank you, Johnny. Turning to our commercial performance. As Johnny highlighted earlier, adoption of CapsoCam Plus continues to expand across both U.S. and international markets. As of December 31, 2025, more than 161,000 patients have been imaged using our system for small bowel screening. In the fourth quarter alone, approximately 9,400 patients utilized CapsoCam Plus compared to approximately 8,374 in the prior year period. representing year-over-year growth of 12%. This continued growth reflects increasing physician awareness, strong clinical utility and the ease of integration into existing practice workflows. Our platform is supported by a robust intellectual property portfolio currently with 83 issued U.S. patents, reinforcing our position as a leader in capsule endoscopy innovation.

In addition, reimbursement continues to support adoption across a broad range of care settings, including both private practices and hospital systems. From a commercial strategy perspective, One of our key advantages is the ability to leverage our existing sales infrastructure as we expand into new indications. We expect that same physician call point driving adoption of CapsoCam Plus today will serve as a natural entry point for CapsoCam Colon when it is FDA-approved, creating a meaningful cross-selling opportunity without the need for significant incremental investment.

As of year-end, our U.S. direct sales organization consisted of 26 representatives, supported by 7 regional sales managers and trainers. Internationally, we are continuing to build momentum including a dedicated team of 4 representatives in Germany, while also expanding our global footprint through distributor partnerships in high potential markets.

New account growth remains solid in the fourth quarter, increasing 16% year-over-year, reflecting continued physician adoption of CapsoCam Plus for a small bowel screening. This momentum has been further supported by recent approvals, including use in pediatric patients over the age of 2 and the ability for remote capsule ingestion, both of which expand access and align well with the growing adoption of telemedicine. We are also encouraged by continued expansion within larger gastroenterology networks. During the quarter, we saw increased penetration in GI clinics and mega GI groups compared to the prior year period.

In addition, while our historical focus has been on private gastroenterology practices, we are now seeing meaningful traction within hospital systems and group purchasing organizations. As existing contracts come up for renewal, we are increasingly being evaluated alongside incumbent solutions and in many cases, selected as a preferred alternative. This is reflected in our hospital channel performance, where the number of hospital system customers increased 87% in the fourth quarter compared to the same period last year.

Turning to our financial performance. For the fourth quarter of 2025, total revenue was $3.9 million, reflecting 13% growth compared to the fourth quarter of 2024. This was driven by an increase in the number of CapsoCam Plus capsules sold. Gross profit was $2 million, an increase of $200,000 or 13% compared to the fourth quarter of 2024. Gross margin was 50% for the quarter, consistent with our expectations as we scale. Operating expenses were $9.4 million, a $3.1 million increase from the fourth quarter of 2024, driven primarily by an increase in expenses associated with the development of the new CMOS image sensors under the agreement with Canon, continued investment in the Colon clinical study and an increase in public company expenses as we now operate as a public company.

We ended the year with $10.1 million in cash and equivalents. Subsequent to year-end, we strengthened our balance sheet with the closing of a $14 million private placement of equity with participation from both new and existing investors. The financing was completed at a price of $4.88 per share which represents a 5% discount to our March 16 closing price as per the terms of the agreement. This equity investment reflects continued investor confidence in our strategy and long-term growth opportunity. We intend to use the net proceeds to support our key priorities across the business, including commercial expansion, continued investment in R&D and the advancement of our pipeline programs, particularly CapsoCam Colon and our AI-enabled platform.

Now I'd like to turn the call back to Johnny for some closing remarks.

Thanks, David. As we look ahead, we believe we are entering a highly compelling phase of execution for CapsoVision. We are building from a position of strength with continued commercial momentum in CapsoCam Plus, expanding adoption across both existing and new customer segments and increasing traction in larger GI networks and hospital systems. At the same time, we are advancing a focused and disciplined pipeline strategy. Our recent 510(k) submission for the AI-assisted reading module represents an important step in enhancing the clinical and economic value of our core platform. In parallel, we are progressing CapsoCam Colon with a clear path toward the next-generation product designed to meet the physician expectations at the launch.

And in our pancreatic cancer initiative, we are continuing to advance what we believe could become the first of this kind noninvasive screening approach, supported by growing body of clinical work and ongoing engagement with the FDA. Underlying all of this is our differentiated platform combined wire-free capsule technology, a scalable cloud-based infrastructure and in-house AI capabilities, which we believe positions us uniquely to expand across the GI tract and address some of the most significant unmet needs in gastrointestinal care.

Finally, with the additional capital raised during the quarter, we are well positioned to continue investing in innovation while maintaining a disciplined approach to execution. Taken together, we believe CapsoVision is well positioned to drive sustained growth, deliver meaningful innovation and create long-term value for patients, physicians and shareholders. I want to thank our employees for their dedication and creativity. Our clinical partners for their collaboration and our investors for their continued support. Together, we are redefining what's possible in GI screening, making early accurate and patient-friendly diagnosis a reality. We look forward to updating you on our continued progress next quarter.

At this time, Dave, Doug and I would be happy to take your questions. Operator, can you please open the line?

[Operator Instructions] Our first question comes from Kyle Bauser from ROTH Capital Partners.

Maybe I'll just ask some follow-ups on the Gen 2 CapsoCam Colon efforts. Any sort of feedback you've received to date? I know you've already enrolled, I think you said over 500 patients of the up to 800. So any feedback there? And would we anticipate seeing results of this study later this year as well in conjunction with the submission or would we see those later?

Yes. Thanks, Kyle. So our Colon Gen 2 have higher resolution, higher image quality and a larger field of view for better detection. We also have better software and working with our AI module. And so far, the enrollment goes well, so far, so good. Our Clinical Director, Keri Jorgenson is a very capable person and a good manager. We are -- all this clinical study enrollment is in good hands. So we still are on track to file the submission to FDA for Gen 2 by the end of Q3. So there is no delay so far.

I appreciate that. And then my follow-up, so regarding the Breakthrough Designation application for pancreatic cancer detection. Good to know that you're kind of working with the societies and KOLs. And I believe you want to kind of understand the ideal diagnostic criteria. What sort of criteria are you contemplating? And would this 90-patient study with the results, would you be able to use those results for the actual FDA application?

In terms of this score, score system is required for diagnostic purposes because it tell you yes or no. So the score system, we rate several important features. We think in meaningful to the pancreas cancer, including the papilla abnormality. And due to some lesion, some tumor growth in the pancreas head. So they will compress the neighboring anatomy or even invaded neighboring anatomy. So you can see that on the duodenal wall next to the papilla. So for each of this abnormality, the doctor grading is yes or no. And if yes, the severity is mild or severe, then they give a grading score for that feature. And the entire score is composed of all these abnormalities or the disease probability-related variable like gender like age. So then we build the score system based on the study results. Based on the multiple various analysis. So that's how things will be implemented. And executed.

So there is such a system is based on the methodical mathematic model. So we expect that this one will be very important step in developing of this noninvasive diagnostic system. So in terms of FDA, I think this one will be very important for FDA to apply, for us to apply for the Breakthrough Designation. The purpose of Breakthrough Designation is to establish priority in their -- in FDA's work because FDA has a lot of cases, and this one gives us the priority over other cases. And it can also invoke the attention of the top FDA officials to make direct decision.

So for clearance, it's possible this establishing the scoring system, they need some validation. Because the population you used for validation -- for establishing the model. Establishing the model cannot be used for validation. It has to be another population. So then there might be a study following this to prove it can be used in the external population outside of the study population. But at that point, this already, we already have built a greater milestone. This is not an evolution. This is a revolution.

Okay. Excellent. That makes sense. Sounds great. Well, congrats on all the progress.

Our next question comes from Bruce Jackson from The Benchmark Company.

So the small bowel business looks like it's tracking very nicely. I think the thing I'd like to get a better handle on is the Colon cam development time line. So I apologize in advance for asking fairly detailed questions here, but how many patients were you -- had you recruited at January 1? Into how many sites? And where are we today at how many sites? And then give us a sense of like how the patient accrual is going to go from here? And how many sites do you have to add in order to like get to the target by a certain date?

Yes. For Gen 1, we enrolled more than 1,000 subjects. And in Gen 2, we target to enroll 800 patients but we will have more reading so that to create a more statistical power for the calculation of sensitivity, accuracy and specificity. And so far, in this Gen 2, we have 11 sites across covering the entire U.S. So far, we are close to 600, okay, over 500, but close to 600. So the enrollment is going well. So far, we have a capable clinical director with a very good team, effective team. So, so far, it's going so well.

But I have to be honest, during summer time, doctor might take a vacation. So doctor's time, we have no control. So that is a factor. But in general, we are in good hands. So far, everything goes according to the plan.

And then my follow-up would be, once we get this 510(k) submitted, what do you anticipate that the review time would be like? And then can you perhaps give us a rough indication of when the Gen 2 Colon Cam capsule might be commercially available?

Yes. So on this one, we expect the FDA -- it takes FDA 6 months to get to clear the device. So from end of Q3, we expect Q1 2027, we'll get the clearance and launching it in the marketplace, the beginning of second half 2027.

There are no further questions at this time, and that concludes the question-and-answer session. And this concludes today's conference call. Thank you for joining. You may now disconnect.

Good afternoon, and welcome to CapsoVision's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I will now turn the call over to Leigh Salvo, Investor Relations for CapsoVision. Please go ahead.

Thank you, operator. Good afternoon, everyone, and thank you for joining us for CapsoVision's Third Quarter 2025 Earnings Call. Joining me today are Johnny Wang, President and Chief Executive Officer; and Senior Vice President of Finance, David Garcia; as well as Doug Atkinson, Senior Vice President of Sales.

Before we begin, please remember that today's remarks include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent Form 10-Q filed by us with the SEC. These forward-looking statements speak only as of the date of this call, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Our call today will cover the following agenda. Johnny will begin with an update on CapsoVision's business, target markets and recent highlights from our pipeline development. Then Dave will walk through a commercial update and recent financial results. After our prepared remarks, we'll open the call up for Johnny, David and Doug to take your questions.

With that, I'd like to turn the call over to Johnny Wang, CEO. Johnny?

Thank you, Leigh, and good afternoon, everyone. CapsoVision's mission has always been clear to make early, accurate and accessible GI disease detection available to patients everywhere. Our long-term vision remains to deliver an ingestible capsule that can screen for multiple cancers, esophageal, gastric, pancreatic, liver and colorectal in a single noninvasive procedure powered by advanced imaging and AI. We delivered a strong third quarter, highlighted by 19% year-over-year revenue growth, a 31% increase in new account generation and a milestone of more than 151,000 patients having used our CapsoCam Plus system to date.

These results reflect the growing market adoption and strong physician engagement as more clinics embrace the advantages of our wire-free, panoramic capsule technology. CapsoCam Plus provides a complete 360-degree view of the small bowel with a 97% completion rate, giving physicians the clarity and the efficiency they need for accurate diagnosis. Combined with our secure cloud-based workflow, providers can review cases anytime and anywhere without the burden of servers or hardware.

[ CapsoCloud ] infrastructure continues to build a vastly identified image database that fuels our proprietary AI development. On the pipeline development front, we have continued to make exciting progress that I'd like to share. First, we continue to invest in AI to improve our existing products and made significant progress with the clinical study to demonstrate the benefits of incorporation of our AI technology into CapsoCam Plus. We currently plan to submit the related 510(k) application to the FDA by year-end 2025.

This updated timing represents a slight delay from our previously anticipated timing due to resource constraints on our third-party biostatisticians. To mitigate further delays, we have contracted with an additional biostatistical consulting group. We expect that it will take approximately 6 months for the FDA to review our application and the pending clearance commercialization is planned to begin shortly thereafter.

CapsoVision is, to our knowledge, the only capsule endoscopy company with a true in-house AI core competency. The scale and the quality of our growing image data flows, inherent in our cloud-based architecture, create a powerful foundation for training AI models and uncovering new clinical insights that will continue to set our platforms apart. And because our system is fully cloud-based, it eliminates the need for on-site servers, reduces cost and downtime and removes the IT burden for clinicians.

The result is an AI-enabled diagnostic platform designed to deliver efficiency, accuracy and accessibility to GI practices across all settings. We also made an important progress expanding our pipeline with the recent submission of an application for Breakthrough Device Designation to pursue use of our noninvasive capsule endoscopy system to enable earlier detection of pancreatic duct adenocarcinoma, a major milestone in our mission to bring screening to one of the deadliest cancers worldwide and represents an important step in CapsoVision's mission to expand our capsule-based diagnostics platform beyond the small bowel and address some of the most challenging diseases in gastroenterology.

Pancreatic ductal adenocarcinoma, the most common form of pancreatic cancer has a 5-year survival rate of only 8%, largely because it is diagnosed at advanced stages that cannot be treated. Currently, no early screening tools are recommended to identify the disease at a treatable stage. CapsoVision is pursuing the potential use of CapsoCam UGI endoscopy to identify pancreatic disease at an early stage. The device's unique panoramic imaging capability enables clear visualization of the duodenal papilla, a small bowel landmark that controls release of digestive fluids from pancreas.

Changes in the papilla's appearance can be associated with pancreatic abnormalities and may serve as an early indicator of disease. Unlike traditional endoscopic or imaging procedures, CapsoCam UGI is completely noninvasive. Patients simply swallow a pill-sized camera, eliminating the need for sedation, intubation or recovery time, while enabling physicians to review detailed images through a secure cloud-based system. The FDA's Breakthrough Devices Program is designed to expedite the development and review of technologies that may offer more effective diagnosis or treatment for life-threatening conditions where no adequate alternatives exist.

If granted, the designation would allow CapsoVision to work closely with the FDA to accelerate development and shape upcoming clinical studies for the regulatory review process. We are also advancing our CapsoCam Colon product. Our Gen 1 510(k) submission is currently under FDA review, and we have begun enrolling patients in our pivotal study for the Gen 2 capsule. This version incorporates enhanced optics and AI for improved accuracy and is on track for submission in the second quarter of 2026 with potential clearance in the fourth quarter of 2026.

We are also very pleased to be partnering with Canon Inc. on next-generation imaging technology. Earlier in the third quarter, we entered into a development agreement focused on creating advanced CMOS image sensors with high resolution and a dynamic range. These sensors are designed to further enhance image quality and performance in future versions of our capsule endoscopes, supporting our goal to deliver the most precise and reliable visualization in the industry.

Finally, we continue to build our organization for growth. Following our successful IPO earlier this year, we were pleased to welcome Mr. David Garcia as Senior Vice President of Finance. His deep financial leadership and capsule markets experience will be instrumental as we move into the next stage of execution and growth. Overall, Q3 is a strong quarter across the board, commercially, operationally and strategically. Our progress in AI, our advancing pipeline for early detection of major cancers and the continued expansion of CapsoCam Plus adoption reaffirm our confidence in leading the next generation of noninvasive AI-enabled GI screening and diagnostics.

I will now turn the call over to Dave to cover recent commercial and operational highlights as well as our financial results for the third quarter. Dave?

Thank you, Johnny. I'm thrilled to have joined CapsoVision and be part of a team that's redefining what's possible in GI diagnostics. I've already been impressed by the talent and energy across the organization, and I look forward to getting to know everyone and to engaging with our investors and the broader Wall Street community in the months ahead.

Turning to commercial highlights. As of September 30, 2025, CapsoCam Plus for small bowel screening has been used by more than 151,000 patients across the U.S. and internationally. In the third quarter of 2025, approximately 8,336 patients used our system compared to approximately 6,961 in the third quarter of 2024, representing year-over-year growth of 20%. Today, our technology is protected by 82 U.S. patents, reinforcing our strong foundation in IP and clinical innovation.

In addition, the device is reimbursed under CPT code 91110, supporting adoption across both private practices and hospital systems. A key strategic advantage of our approach to the GI market is the ability to leverage our existing sales infrastructure as we expand into additional indications. Importantly, we expect that the same call point for CapsoCam Plus will serve as the entry for CapsoCam Colon once it has been approved for commercialization, creating a built-in cross-sell opportunity without requiring significant increases in headcount.

While we expect to scale over time, as of September 30, 2025, our U.S. direct sales team included 26 representatives supported by 7 regional sales managers and trainers. Internationally, we're gaining traction with 4 representatives in Germany, and we continue to efficiently expand into high potential global markets through distributor partnerships. New account generation grew 31% in the third quarter of 2025 over the comparable quarter in 2024, demonstrating continued physician adoption of our capsule for use in small bowel screening as well as the impact of approvals in pediatric patients over 2 years old and remote ingestion of the capsule, furthering the benefits of telemedicine.

We were also encouraged to see a 24% increase in GI clinics and mega GI groups, which we define as those with more than 150 providers with multiple locations and in multiple states in the third quarter of 2025 over the same quarter last year. Although our historical focus has been on private gastroenterology practices, we are now achieving momentum in hospitals and GPOs as incumbent contracts come up for renewal. In the third quarter of 2025, hospital systems customers increased 26% over the prior year.

Turning to our financial performance. For the third quarter of 2025, total revenue was $3.5 million, reflecting 19% growth compared to the third quarter of 2024. This was driven by an increase in the number of CapsoCam Plus capsules sold. Our gross margin was 54% for the quarter, consistent with our expectations as we scale. Operating expenses were $9.9 million, a $2.5 million increase from the quarter of 2024, driven primarily by an increase in expenses associated with the development of the new CMOS under the development agreement with Canon Inc. and the increase of general and administrative expenses due to higher payroll and benefits expenses and stock-based compensation expenses associated with the executive officer departure and higher professional service expenses, including audit, legal and consulting fees as we are operating as a public company.

Net loss was $7.9 million for the third quarter of 2025 compared to a net loss of $5.8 million in the third quarter of 2024. We ended the quarter with $17.8 million in cash and equivalents, an increase from $1.1 million at June 30, 2025. At the beginning of the quarter, on July 3, 2025, we completed our initial public offering and received total net proceeds of $23.4 million. We also announced a development agreement with Canon to design and evaluate next-generation CMOS image sensors for future versions of our capsule endoscopes.

While not intended for CapsoCam Plus or CapsoCam Colon, this collaboration marks a key step in advancing our innovation pipeline and imaging capabilities. In July 2025, we made a prepayment of $1 million. R&D expenses for this agreement recognized in the third quarter of 2025 were $1.6 million. Accrued liability balance as of September 30, 2025, was $0.6 million.

Now I'd like to turn the call back to Johnny for some closing remarks.

Thanks, Dave. As we look ahead, we are entering one of the most exciting periods in CapsoVision's history. We have clear momentum across every part of the business on the continued commercial growth of CapsoCam Plus to the expansion of our pipeline into new indications like colon and pancreas to the advancement of our AI-assisted diagnostics. Our application for Breakthrough Device Designation for pancreatic screening reflects both the urgency of that unmet need and the promise of our technology to detect disease earlier and treatment can still make a difference.

In addition, continued development of our AI model for CapsoCam Plus has the potential to make capsule endoscopy faster and more accurate than ever before. As with our CapsoCam Colon product progressing and the additional development efforts underway with partners such as Canon, we are steadily building a comprehensive platform that can transform how gastrointestinal diseases are detected and managed. Following our successful IPO, we are expanding our leadership team and executing a clear growth plan.

I'm confident that the combination of our advanced imaging, proprietary AI, fully cloud-based architecture gives us a strong foundation for long-term success. I want to thank our employees for their dedication and creativity, our clinical partners for their collaboration and our investors for their continued support. Together, we are redefining what's possible in GI screening, making early, accurate and patient-friendly diagnosis a reality. We look forward to updating you on our continued progress next quarter.

At this time, Dave, Doug and I would be happy to take your questions. Operator, can you please open the line?

[Operator Instructions] And we will take our first question from Bruce Jackson from The Benchmark Company.

First, I want to ask a pipeline question. So with the AI feature, if you're going to be submitting that in the fourth quarter, what does that do to the other milestones in that program? So does the approval also move forward a quarter? I think we're looking at maybe first quarter next year originally, would that go to the second quarter?

Bruce, thanks for the question. It normally takes 3 to 6 months. So it should be available in the second half. As soon as you get it cleared, we will launch it in the market.

Okay. And then a question on the operating expenses. So you mentioned that there was a $1.6 million charge or fee for the Canon agreement. That would bring kind of like the core R&D rate in and around maybe $4.5 million. Is that kind of the level we should assume going forward?

Yes. Thanks. This is Dave. So the $1.6 million expense for R&D for Canon, that was -- think of that as a onetime in nature for Q3. So going forward, you can take that out.

Our next question comes from the line of Kyle Bauser from ROTH Capital Partners.

First one for me, congrats on applying for Breakthrough Designation for pancreatic cancer. With that application, is there any sort of clinical data that you're able to use in application? And maybe any key highlights there that you can provide for us?

Yes. We do have a small feasibility study conducted about 6 years ago. Yes. So it's a small study, 20 subjects, but 2 with cancers, we saw both of them. We -- actually, it's 2 out of 2 out of 20. So it's a perfect number, although the study is small. So that's made us decide to pursue this great opportunity.

Great. Now that's very helpful. And then maybe just to touch on the collaboration with Kodak. In terms of timing there, will that be used in the CapsoCam UGI with the pancreatic -- for pancreas? Will it be that later iterations? Maybe just an update on the time line there.

Can you say it again, sorry?

With colon...

Yes. So just with Kodak, the Kodak, that collaboration...

Oh, CMOS sensor. Canon Inc., CMOS sensor. Yes. Yes. Please go ahead.

Yes. So kind of what's the timing? Just an update on the time line there. Will that be used for the pancreas CapsoCam? Or will that be used in later iterations, that imaging?

Actually, pancreas -- for pancreas pivotal study, we will move ahead without waiting for this Canon sensor. Canon sensor, we expect to be ready in 2026 and going into capsule in 2027. Then for the pancreas pivotal study, we are using existing sensor from Toshiba. And with the new optics, which has 35% more viewing area, field of view and with better image quality. So that should suffice for this application, given that we already got a very good result in feasibility study using the lens with not as good quality as this new lens.

Okay. Great. That's helpful. And then last one for me. In terms of the commercial organization and -- what does the headcount look like, especially as you're expanding with the rollout of CapsoCam Plus and then CapsoCam Colon on the horizon?

Yes, it's a great question, [ Kevin ]. Right now, we are sustained with 26 territory managers, and we have 7 directors, sales directors and field sales trainers here in the U.S. market. We will maintain that count. We're looking at adding an additional 2 territories going into 2026. But we have a methodology about the expansion of these territories. The nice thing is it's the same call points that we're making with all of our products that we will be adding to our bag in 2026 and then going into 2027.

So we have the right team in place right now. We don't see a huge increase in headcount. However, with colon, once it is -- we gain additional expansions and indications on what it can be used for, clearly, we're going to need more feet on the street. But right now, we're going to maintain with the sales team that we have in place, both U.S. and internationally, and looking at 2026, adding 2 additional territories in some of the larger populated states such as Florida and in the New York metro market.

[Operator Instructions] There are no further questions. That concludes our question-and-answer session. That also concludes the call for today. Thank you all for joining, and you may now disconnect.